Baubap recently announced that the Mexican micro-lending platform had raised $20 million in debt financing from Park Cities Asset Management through its Six Point Fund vehicle.
According to the fintech, which currently leads the market for small lending in Mexico, the funds will be used to expand Baubap’s financial products and provide 3 million new loans over the next 12 months “to a sector underserved by traditional banking.”
With this credit line, Baubap consolidates its position as a critical player in the segment and will exceed 10 billion pesos lent to 2 million people since its founding.
The company, founded in 2019, offers microloans in a fast, digital process through cell phones for users who do not have access to capital and are currently limited to using informal financing mechanisms.
Lack of access to financial products in Mexico
Data from the 2021 National Financial Inclusion Survey (ENIF) in Mexico reveals that in this country, 32.2% of people aged 18 to 70 do not have access to any type of formal financial products — and in this scenario, companies such as Baubap are cover the financial gap by developing fast, accurate lending systems to support the small entrepreneurs.
Baubap implies that it uses alternative data and a proprietary artificial intelligence system to assess willingness to pay.
This is complemented, the company says, with a financial education support platform that seeks to help consumers make better use of these loans and also prepare them to upgrade to more complex products in the future.
“There is a sector of the population whose needs have been ignored, and in addition to the lack of financing, they also do not have access to financial education, which makes them very vulnerable to informality and frauds,” says Roberto Salcedo, CEO and Co-founder of Baubap in a statement.
“Our company was created from this reality, and we developed a vehicle that offers quick access to capital, eliminating access barriers, with a dignified collection process and without bad, aggressive or demoralizing practices.”
The company currently has 500 thousand borrowers nationwide and expects this number to grow to 1.5 million in 2023.
Scaling up the company’s micro-lending platform
“We have a clear path, and this financing helps us move forward; what’s next in the plan is to scale to productive asset financing and debt consolidation products; launch payment of services from the app; expand our services to the insurance sector and expand our coverage to more countries in Latin America,” comments Luis Villarreal, co-founder, and CTO of Baubap.
Park Cities Asset Management joins the group of investors backing Baubap along with Grupo Alfin, YCombinator, Goodwater Capital, 500 Startups, Harvard Management Company, and Cathexis Ventures, representing debt and equity financing totaling $30 million.
“Baubap brings a unique approach to lending to a market segment traditionally underserved in Mexico and Latin America, in general,” says Alex Dunev, CIO and co-founder of Park Cities Asset Management.
“We look forward to our partnership with Baubap as they become one of the market leaders in the sector, not only offering consumers real and affordable solutions but also differentiating themselves from competitors by providing consumers with financial education and treating them with respect and dignity,” he concluded.
Jorge C. Carrasco is a Cuban journalist and writer based in Brazil. He has contributed to several publications, such as Foreign Policy, The Spectator Australia, Estadão, Época, Washington Examiner, and Quillette, among others.